Mumbai: Crisil on Thursday said India Inc’s credit ratio fell to an over three-year low for the second half of FY20, and gave a “negative” outlook for FY21 expecting downgrades to continue outpacing upgrades due to the COVID-19 pandemic.

The credit ratio, or the number of companies upgraded to those downgraded, slipped to 0.77 for the September 2019-March 2020 period, down from 1.21 in the preceding six months. However, from a quantum of loans perspective, the debt-rated credit ratio rose to 1.24 from 0.25 in the preceding six months.

There is little scope for optimism in FY21, due to the overhang of the COVID-19 crisis, the agency said.

Its president Gurpreet Chhatwal said the pandemic has slammed brakes on economic activity and also has the possibility of human suffering, which is unprecedented.

It is a black-swan event and we are very early into the crisis, making it difficult to model the economic impact, he said, adding that the agency has done an impact analysis on 35 sectors with a debt outstanding of Rs 23 lakh crore.

The rating agency has assumed a lockdown period of up to 2 months and another one month for normalcy to return after that as its base case. Chhatwal said economic activity will begin only in the second quarter.

The analysis says that auto dealers, and companies in the gems and jewellery, airlines, real estate and steel sectors do poorly because of leveraged balance sheets and dependence on discretionary spending for survival.

For a few sectors like telecom and fast moving consumer goods, the crisis can get turned into an opportunity as well, the analysis said.

Its senior director Somasekhar Vemuri said 44 per cent of the rated debt in 15 sectors shows a high degree of resilience to withstand the pressures, while 52 per cent of the debt in 15 sectors is showcases a moderate resilience with a downward bias and five sectors with 4 per cent of the debt have low resilience to confront the crisis.

In what can come as a relief, the agency said the non-bank lenders it rates have adequate liquidity to manage repayments for the next two months despite the drying up of repayments by borrowers.

On the securitised portfolios sold to other lenders, Crisil said most of the rated pass through certificates can withstand the drop in collections because of the option of moratorium on repayments given by Reserve Bank of India till May 2020.

On the asset quality perspective, Vemuri said banks’ non-performing loans may go up due to the crisis, but added that it is too difficult to make an estimate of the same right now.

Impact on asset quality will differ across asset classes depending on resilience of the underlying borrower segment to lockdown and eventual lifting of the same, the agency said.